Rating Change #6

Merck ( MRK) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • MERCK & CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MERCK & CO reported lower earnings of $0.27 versus $5.37 in the prior year. This year, the market expects an improvement in earnings ($3.73 versus $0.27).
  • Net operating cash flow has increased to $1,721.00 million or 25.97% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.33%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 249.1% when compared to the same quarter one year prior, rising from $298.80 million to $1,043.00 million.
  • The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
  • MRK's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues slightly increased by 1.4%. Growth in the company's revenue appears to have helped boost the earnings per share.

Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. The company has a P/E ratio of 68.3, equal to the average drugs industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Merck has a market cap of $111.8 billion and is part of the health care sector and drugs industry. Shares are up 2% year to date as of the close of trading on Wednesday.

You can view the full Merck Ratings Report or get investment ideas from our investment research center.

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